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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Two goods are consumer substitutes if they provide essentially the same utility to consumers






2. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






3. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






4. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






6. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






7. The additional benefit received from the consumption of the next unit of a good or service






8. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






9. Ed > 1 - meaning consumers are price sensitive






10. AVC = TVC/Q






11. Models where firms are competitive rivals seeking to gain at the expense of their rivals






12. Entry of new firms shifts the cost curves for all firms downward






13. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






14. The sum of consumer surplus and producer surplus






15. The practice of selling essentially the same good to different groups of consumers at different prices






16. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






17. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






18. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






19. Exists at the point where the quantity supplied equals the quantity demanded






20. AFC = TFC/Q






21. The most desirable alternative given up as the result of a decision






22. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






23. Es = (%dQs) / (%dPrice)






24. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






25. Ed < 1






26. Costs that change with the level of output. If output is zero - so are TVCs.






27. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






28. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






29. The output where ATC is minimized and economic profit is zero






30. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






31. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






32. All firms maximize profit by producing where MR = MC






33. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






34. A good for which higher income increases demand






35. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






36. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






37. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






38. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






39. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






40. Total product divided by labor employed. APL = TPL/L






41. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






42. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






43. The price of a good measured in units of currency






44. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






45. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






46. The ability to set the price above the perfectly competitive level






47. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






48. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






49. Ed = (%dQd)/(%dP). Ignore negative sign






50. The rational decision maker chooses an action if MB = MC